Types of investments

Investment is putting your money to work to maximise your financial potential. Unlike betting, investment is not putting your money at risk by betting on an outcome that is uncertain. Investment involves analysis and commitment of capital with an expectation of profits. Essentially, there are different ways you can invest in your finances with an expectation to gain some kind of interest, let’s look at some of them;

Buying the shares of a company’s stock means that you own a piece of that company. You are given power to vote in a shareholder’s meetings and receive any profits the company gains. When you buy a stock, you are not guaranteed a permanent income or interest rise. The values of the stocks fluctuate on a daily basis.

Bonds are loans given to big organisations by investors. In return, they gain systematic interest payments and return of the original bond amount ones it matures. Bonds are mostly issued by cooperates, agencies and government organisations. The interests you receive from bonds are taxable. Bond values fluctuate depending on the interest rates of the companies.

Annuities are insurance contracts between and individual and insurance companies. They use your finances to generate income and make regular payments depending on the contract. Payments that start immediately after the investment are immediate annuities while future payments are deferred annuities. With annuities,, you grow your investment without paying annual taxes but will still have income tax reductions on retirement. You cannot withdraw annuity funds until you reach the retirement age.

Real estate investments involve owning, purchasing and managing real estate properties with the expectation of gaining profit. Real estate investments can give monthly incomes depending on how the property is used. Real estate properties provide monthly income to the owners when the tenants pay monthly rent. Real estate is profitable over a long period of time because the assets appreciate in value.

Savings can also be a form of investment depending on the amount of money you put towards the savings and the goals you aim at achieving. Saving for education is an investment because education may help you earn a higher income. Business savings are a risky investment. You could gain interest from your business or lose all your money depending on the market. Saving your money in the bank is similar to loaning with no taxes, low interest rates and the risks involved are minimal.

Precious items can be considered a form of investment if they are valuable, can bring profit, and you intend to resell them to grow your money. They have lower credit ratings and are a risky form of investment. They fall under alternative investments. Keep in mind that basic consumer products like cars, televisions and mobile phones are not investment items because they depreciate in value with use. You cannot expect people to pay more for the product since they age with use.

When you are looking to make more money, investments are the way to go. Chose an investment opportunity with the finances needed and risks involved in mind. Long term investments are the best if you are looking to secure your future